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Working around IT Doesn’t Apply to ERP Software

As a member of the Software & Information Industry Association (SIIA), I was able to download a paper called “Purchasing SaaS for Business Leaders” by Nina Sorrentino. The paper describes benefits of SaaS including increased flexibility, security, reduced costs, increased stability, and better accountability. The paper also discusses how SaaS has altered the relationship between business and IT leaders:

SaaS is gaining traction, and this is changing how we make our IT buying decisions. While business leaders work with their IT teams, they are no longer exclusively beholden to them as the ultimate arbiters of systems and software. It’s more collaborative
now and there are more options.

This is a true statement, but for ERP it can be dangerous.

SaaS Benefits Differ by Application

I am a SaaS advocate … there are many good reasons for businesses to purchase SaaS, although don’t confuse SaaS with web-based software and Cloud computing. However, reasons for using SaaS do not apply equally across all software packages and applications. For technical reasons, a web conferencing application is a good SaaS candidate while a CAD/CAM graphical application may not be as compelling. For business reasons, simple applications targeted to small business will be better SaaS candidates than mid-size and larger ERP applications.

Good for adoption, bad for success

Working around IT has enabled rapid adoption of SaaS and web applications such as file sharing, web conferencing, and even customer relationship management (CRM). Departments and individual users can buy SaaS applications as long as their boss will approve their expense reports. This helped Salesforce gain 11% of the CRM market by 2008 while the complete ERP market had less than 4% SaaS penetration.

ERP software is different from applications that deliver specific functions to a few users. A successful ERP project involves automating business processes and sharing information across departments, offices, and even subsidiaries. Wikipedia’s definition starts by saying “ERP integrates internal and external management information across an entire organization.” For this reason, “buy in” from IT is critical. Most articles on successful ERP implementations site organizational buy in as the most important factor for success. To prove my point, read the article by Eric Kimberling on Toolbox.com entitled 7 Critical Success Factors to Make Your ERP and IT Project Successful.

Stand alone ERP software

When a lone-wolf purchases an inventory, purchasing, sales order, accounting, or similar application, the results are similar to somebody who tries to use Quicken to run a multi-departmental business. At first, the person or department that made the purchase realizes some benefit while other departments suffer because they cannot access the data. When the lone-wolf organization attempts to share the data, it finds that the process of sharing is manual and cumbersome. Therefore data is shared only reluctantly and organizations begin pointing fingers at one another. Future attempts to automate fail because the data relationships were not designed correctly from the start.

Conclusion: SaaS Works Differently for ERP

The SIIA paper accurately describes several benefits of SaaS implementations for small businesses. The SaaS benefit of avoiding IT purchasing bureaucracy may work for some systems, but definitely does not apply to an ERP purchase. SaaS allows companies to reduce hardware expenses and ongoing maintenance by outsourcing computing services to industry experts. For ERP these benefits can only be realized through an organized implementation where requirements are defined across organizations.